Bear Creek Capital kept two sets of books for its accounting “to lie to the bank,” according to testimony heard during the sixth day of the criminal trial of former Kenwood Towne Place developer Matt Daniels.

Jenni Roudebush, who was senior vice president and market manager for LaSalle Bank during the Kenwood Towne Place Project, was the second witness to testify Thursday morning. During cross examination by Daniels’ defense attorney, Ben Dusing, Roudebush testified that Bear Creek Capital was keeping two sets of books “to lie to the bank.”

Daniels is facing 23 criminal counts of fraud related to the $175 million mixed-use development next to Kenwood Towne Centre in front of District Judge Michael Barrett. Contractors walked off the Kenwood Towne Place job in late 2008 because of unpaid bills. Daniels’ trial started Dec. 5.

The first time Roudebush became aware of any issues on the project was in September 2008 when she said she heard a vendor was being paid slowly for its work on Kenwood Towne Place. She asked Ron Murphy, the relationship manager for Bear Creek Capital at LaSalle Bank, to set up a meeting to see what was going on. At that meeting with Daniels, Murphy, Bear Creek Capital co-principal Tim Baird, Bear Creek Construction director of construction Aubrey “Audie” Tarpley and a bank analyst, Daniels said everything was “going great” and that the project was on budget and even ahead of schedule, Roudebush testified. They toured the site, saw subcontractors working, and their concerns were alleviated, Roudebush said.

Then, around Thanksgiving of 2008, a lien was filed against the project, Roudebush said. At a Christmas party at Trio, Roudebush said she had a conversation with Herb Weiss, a lawyer for Bear Creek Capital, about a $5 million cost overrun on Kenwood Towne Place.

Roudebush testified that Daniels said he would send over information to get everything straightened out. According to Roudebush’s testimony, what was sent over were “phony spreadsheets” with columns and figures the bank was supposed to ignore.

“The numbers didn’t add up.” She then testified that Bear Creek Capital was keeping two sets of books, and when the bank started looking, “nothing made sense or tied back to the budget.”

During cross examination, Dusing asked if the Kenwood Towne Place construction loan was one that LaSalle Bank competed to win. Roudebush said “yes,” that they “competed” to win the loan.

Dusing asked Roudebush if it was important to close the KTP loan in a timely manner. She answered once all due diligence was met.

Dusing then asked if it was important to close by the end of calendar year 2007. Roudebush said, “It was not.”

Dusing asked Roudebush to read a line from her deposition in the civil trial over Kenwood Towne Place. She read, “We all wanted to get the loan closed. I wouldn’t say there was any pressure.”

Roudebush testified that Bear Creek Capital was among its top 15 clients in the Cincinnati market leading up to the closing of the Kenwood Towne Place construction loan.

In a email dated Jan. 9, 2008 from Roudebush to Baird, she wrote, “I wanted nothing more than to get that deal into 2007 numbers and was pushing as hard as you guys were to get it closed.”

Dusing then asked if Roudebush was aware that Baird made allegations of an improper relationship between Baird and Roudebush. She responded that those were the “most malicious lies” and that she would “absolutely, vehemently deny those allegations.”

Before Roudebush’s testimony, Peter Goffstein, who worked as Bear Creek Capital’s chief development officer during the construction of Kenwood Towne Place, took the stand.

Goffstein described Daniels’ management style as “manage by crisis,” whatever the hottest issue was he would deal with it. Goffstein said people would line up at Daniels’ office for meetings, get their marching orders and then go and complete their tasks.

Goffstein testified that his role in the Kenwood Towne Place project was minimal because there was a project team overseeing it.

“I began to run the development meetings. If the meeting was three hours we might spend 10, 15 minutes on a little issue on Kenwood,” Goffstein said. “The Kenwood team dealt with the day-to-day issues.”

Goffstein said Daniels was entrusted to run the day-to-day.

U.S. Attorney Anthony Springer went over an email from Goffstein written in December 2007 to Tina Schmidt, the former chief financial officer of Bear Creek Capital. Goffstein said he was in charge of approving employee expenses and that Aubrey “Audie” Tarpley was excessively charging meals and “getting fast and loose with expenses.” In the email chain, Schmidt responded that he was creating goodwill with vendors.

Goffstein said Tarpley may have bought subcontractors turkeys or coats.

“We weren’t paying them the large bills they were actually owed,” Goffstein said.

During cross examination, Daniels’ attorney Ben Dusing asked Goffstein how many meetings he attended in regards to Kenwood Towne Place. Goffstein said not more than two or three. Dusing then estimated that roughly 72 regular Kenwood Towne Place meetings took place between the time construction started and when the project stalled.

Dusing asked if Bear Creek Capital was dysfunctional because it was not equipped to deal with a project as complex as Kenwood Towne Place. “They might not have hired the right people to do that,” Goffstein said.

If you need to get caught up on the trial, here are a few links for additional information: